Where to hide cash from the inflation?

[mrfeh]

Full disclosure, I consider myself reasonably savvy about personal finance but freely admit I have no expertise in finer nuances of investing. That being said, for those of us who prefer lazy man investing, I think current financial events should usually be ignored to a large extent. Whether it's inflation, or a market downturn, isn't that the reason most of us have a balanced portfolio?
Precisely because I am no expert, my ratio of stock and bond mutual funds and cash give me a comfort level so I do not stress out over market blips. Am I missing something?

No, you're not. There are many bogleheads here (including me).

There are also many market timers here.

 

[DjBrown]

I was looking for investment that is resilient to current high inflation.
PM going up nicely today

If they raise prices by 10% in most countries that raises price of smokes by 2% only since most of the cost are taxes.

 

[Magus]

From memory, the long term US inflation average as of a few years ago was 4.11%, well under the past 30 years rate. Here's a slightly outdated chart.

One thing to note when comparing recent inflation since 1980 and especially 1990 is that we outsourced a lot of our inflation by growing imports from low cost areas. China alone probably helped reduce our CPI by at least 1% a year from 1995 to 2015. That source of "deflation" is now gone as that's fully mature and they are starting to see significant cost increases themselves as their standard of living has improved. I think 2% inflation for a long time again is unlikely. Think we're about to see an era of higher than recent memory inflation.

 

[OldShooter]

... I think 2% inflation for a long time again is unlikely. Think we're about to see an era of higher than recent memory inflation.

Well, certainly simple regression to the mean would support that hunch. Having noticed for years that economic forecasts are basically worthless and that my economic forecasting is no better, we have been heavily into TIPS since we retired/2006. As I have mentioned before we see TIPS being as much an insurance policy as an investment.

Even then, your only option is individual TIPS.

Yes, and sadly they are not really the hedge you'd hope for because the gains are all taxable. I agree on the attractiveness of I-bonds but IMO the few that one can buy cannot provide significant inflation defense for most retirement portfolios.

 

[daylatedollarshort]

Yes, and sadly they are not really the hedge you'd hope for because the gains are all taxable. I agree on the attractiveness of I-bonds but IMO the few that one can buy cannot provide significant inflation defense for most retirement portfolios.

We have our TIPS in IRAs and 401Ks so we are going to get taxed no matter what we put in there. I checked rates today and the 20 years and 30 yields years are no longer negative.

 

[OldShooter]

... I checked rates today and the 20 years and 30 yields years are no longer negative.

Pretty much the expected result I think. As I studied TIPS before committing, I concluded that if we got some really exciting inflation a la 79s/80s, that TIPS would probably be bid up into negative interest territory by people who were willing to suffer that pain due to fear of the unlimited future risk of being unhedged.

 

[corn18]

Right now, my 2.25% 30 year fixed rate mortgage is making be 5% real.

 

[Magus]

Right now, my 2.25% 30 year fixed rate mortgage is making be 5% real.

Nice rate on a 30 yr fixed. I'm at 2.00% on a 5 year ARM with 4.5 years left but I'd happily trade to 2.25% fixed! I did see some 15 year fixed at 1.75% last summer but was going to wait till 1.5% with no points and just never saw it get there.

 

[eyenitnoy]

Any idea where to park cash for the next 1-2 years?

I just bought PM. They have lot of pricing power (very wide moat) and hopefully will be able to deal with inflation better than cash.

I'd be cautious on pulling out of the stock market due to inflation.
Yes, inflation pounds the stock market-as it has been doing.
But moving money around to try to beat inflation sounds a lot like market timing to me.
I'd just keep a dollar cost averaging plan in effect if I was saving.
As I am withdrawing, I try to draw less on market downturns and more on upturns.
But predicting future inflation rates and market moves is, imo, impossible, so hard as it is I'd just stick with a regular investing (or withdrawing) plan.

 

[troutnut1]

I’m hoarding ice cream, expensive ski gear, and vintage musical instruments.

 

[NW-Bound]

I’m hoarding ice cream, expensive ski gear, and vintage musical instruments.

Dang! This reminded me that I still have a few pints of häagen-dazs bought in the summer. Probably got all freezer burnt.

I had to stop eating sweet for a little while to bring my blood glucose down a bit. Then, forgot all about the ice cream.

Being a frugal guy, I will still eat it, freezer burnt or not. Just can't throw away food that is still edible. It's more than frugality, it's almost a religion to me.

 

[aja8888]

Dang! This reminded me that I still have a few pints of häagen-dazs bought in the summer. Probably got all freezer burnt.

I had to stop eating sweet for a little while to bring my blood glucose down a bit. Then, forgot all about the ice cream.

Being a frugal guy, I will still eat it, freezer burnt or not. Just can't throw away food that is still edible. It's more than frugality, it's almost a religion to me.

I just ate some freezer burnt ice cream last week. It was not good, but edible. I'm too cheap to have thrown it out.

 

[PatrickW]

I went to 20% GLD about 6 months ago, and about 35% into VWIAX (Vanguard Wellesley, which in hindsight has been a loser. My crystal ball was a bit cloudy on that one).

 

[ychuck46]

Alternative investments

Put monies into high quality REITs, BDCs, and other high dividend payers to stay ahead of inflation.

 

[LA_Newsboy]

One of my portfolios is energy, specifically gas and oil, specifically the large pipelines that move the carbon molecule around the country. And while I would not recommend this idea for most people, I've parked some money in preferred stock of Teekay, which owns or leases a fleet of LNG tankers. The symbol on Fidelity is TGPPRB. It pays a fixed dividend of 8.2% and that won't change for five years. You can learn more by searching QuantumOnline. The future of liquified natural gas is very bright looking out as far as you want, which has been made even clearer by the events in Europe. I'm happy with 8.2% for the next few years.

 

[LarryMelman]

I was looking for investment that is resilient to current high inflation.

No, you said you were looking for a place to park cash. That is quite different from an investment. I can't tell if you understand that.

 

[Magus]

It is more like 3%, unless you start with the biggest, longest inflationary period outside of World Wars. The Federal Reserve and CPI-U were created in 1913, so that is "long-term" inflation where we have reasonable numbers and reasonably similar financial structure (setting aside the gold standard business, which actually didn't help with inflation if you look back further).

This site calculates 3.1% since 1913.
https://inflationdata.com/Inflation/Inflation_Rate/Long_Term_Inflation.asp

And multpl.com shows ~2.25%, but goes back to the 1870s with pre-Fed and pre-CPI wonky, wild data.
https://www.multpl.com/inflation

I’d argue inflation stats from before we dropped the gold standard are not relevant. Especially with the federal reserve having pumped in more $ into the system in 2020 than it did in previous history combined

 

[jollystomper]

Full disclosure, I consider myself reasonably savvy about personal finance but freely admit I have no expertise in finer nuances of investing. That being said, for those of us who prefer lazy man investing, I think current financial events should usually be ignored to a large extent. Whether it's inflation, or a market downturn, isn't that the reason most of us have a balanced portfolio?
Precisely because I am no expert, my ratio of stock and bond mutual funds and cash give me a comfort level so I do not stress out over market blips. Am I missing something?

I agree with this. I am more in the mode of "Don't just do something, stand there" . So my response to the OP is as long as you have your desired balanced of cash/bond/equities, it is all good, and this too shall pass. Perhaps I have lived long enough thru economic ups and downs and not see the world implode that I am patient... or complacent .

 

[indiajust]

If you have 2 years of expenses in cash, and can live reasonably well on portfolio earnings, and can hold at least 5 years, stocks are the way to go. The companies that survive and thrive in the crisis will dominate afterwards. Now that many growth stocks are beaten down and the speculators are leaving, it is becoming clear who is swimming naked.

Be careful with your allocation. And if you are wrong, by all means sell. I don't think this is a good market for indexing. If the fed takes away the punchbowl to stifle inflation and forces a recession, the weaker firms will die, just like 2001.

Unlike 2001, there are many more international investing opportunities. Best in class companies are getting set up for a run. The foundation of the next bull market is being put in. Be there.